Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Advanced Tax > VAT > Flashcards

VAT Flashcards

1
Q

Advantages of VAT

A

Impression of bigger business
Avoids penalties for late registration
Able to recover input VAT (if de minimis could recover all)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Disadvantages of VAT

A

Admin (burden of compliance)
Fees/penalties if obligations not complied with
May deter customer if they are not VAT registered/or need to absorb cost in profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Threshold for registering for VAT

A

£85K turnover (standard and zero rated goods)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Threshold for deregistering for VAT

A

£83k turnover (standard and zero rated goods)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

VAT turnover tests (2), when do they need to notify HMRC and when is it effective from?

A

Historic - do taxable supplies in the last 12 months exceed the registration threshold? 30 days. 1st day of the 2nd month following month where registration threshold is exceeded

Future - will taxable supplies in the next 30 days alone exceed the registration threshold? end of 30 day period. Immediately.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How may a sale or transfer of business be treated? (2)

A

Normal taxable supply - Charge output VAT on taxable assets transferred

Transfer of going concern - not treated as a supply for VAT if conditions are met

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the conditions to be treated as a transfer of going concern (TOGC)? (4)

A

-business is transferred as a going concern
-no change in trade
-no significant break in trade
-transfer is, or becomes, VAT registered immediately after transfer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What happens if the transfer is treated as a TOGC? (3)

A

-not be a taxable supply
-no output VAT will be charged on the assets transferred
-no input VAT us recoverable by the purchaser

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Explain transfer of registration

A

-transfer of VAT registered business would normally require compulsory deregistration

HOWEVER
-by joint election, the transferee can take over the VAT registration of the transferor

this includes past liabilities would could be seen as an unacceptable risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Making both taxable and exempt supplies gives rise to..

A

partially exempt trader. Can recover in relation to taxable supply but not the exempt ones

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the 2 de minimis tests (simplified partial exemption tests)?

A

Test 1
-total input tax <625 per month
-exempt supplies <50% of all supplies

Test 2
-total input tax LESS input tax directly attributable to taxable suppliers >625 per month
-exempt supplies <50% of all supplies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What happens if both de minimis tests have failed?

A

A full partial exemption calculation is required

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How do you calculate a full partial exemption calculation? (standard method)

A

Input VAT taxable supplies - recoverable in full
Input VAT exempt supplies - not recoverable
Input VAT not directly attributable to either - apportioned between taxable and exempt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How do you calculate what amount is attributable to taxable supplies? (in a full partial exemption calc)

A

total supplies*

=

to the nearest % x non-directly attributable input VAT

*excluding VAT and supply of capital items

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the third de minimis test? (used following full partial exemption calc or own method? agreed with HMRC as long as reasonable)

A

-input tax relating to exempt supplies < 625 per month on average
-input tax relating to exempt supplies <50% of all input tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are 2 examples of something outside of scope of VAT?

A

Salaries and dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are 5 examples of something exempt of VAT?

A

Insurance, Land, Postal services, Financial services, Education

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are 5 examples of something zero-rated for VAT? & the VAT rate?

A

Non-luxury food, children’s clothes, books, medicines, transport
0%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are 2 examples of something reduced-rated for VAT? & the VAT rate?

A

Domestic gas and electricity
5%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the standard rate of VAT for everything else?

A

20%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Pre-registration VAT - goods

A

-acquired for business purposes, cannot be sold or
consumed prior to registration (still in inventory)
-<4 years before registration

22
Q

Pre-registration VAT - services

A

-services supplied must be for business services
-supplied <6 months before registration

23
Q

What is the value at which the final tax liability is waived when deregistering for VAT?

24
Q

Advantages of annual accounting scheme? (3)

A

-one return to help relieve the burden of administration
-fixed monthly payments assist with budgeting/cash flow
-extra month to submit return and make balancing payment

25
Conditions to join annual accounting scheme? (4)
-member of VAT group cannot join -vat returns must be up to date and no convictions of VAT offences or penalties for dishonest conduct -vat exclusive taxable turnover expected to be <1,350,000 -remain in scheme until >1,600,000
26
Describe the operation of the annual accounting scheme (3)
-one vat return submitted within 2 months of end of return period -9 payments from month 4-12 based on 10% of last year VAT liability -balancing payment (or repayment) when the return in filed
27
Advantages of flat rate scheme? (2)
-less admin burden as no input VAT recorded -possibly less VAT due than under normal VAT rules
28
Conditions to join flat rate scheme? (3)
-vat exclusive taxable turnover expected to be <150,000 -remain in scheme until >230,000 -member of VAT group cannot join
29
Describe the operation of the flat rate scheme (6)
-Net VAT due % of all gross VAT inclusive total turnover (zero rated and exempt as well) -no input vat is recovered -% varies according to trade (given in q) -no input vat records must be kept -vat invoices issued as normal (standard, zero etc) -can be used in conjunction with annual accounting scheme but not cash accounting scheme *can request calcs are based on cash paid/received
30
Advantages of the cash accounting scheme? (2)
-business selling on credit to not have to pay output VAT until they have been paid -automatic relief for impaired debts
31
Dis-advantages of the cash accounting scheme? (2)
-input tax cannot be claimed until invoice is paid which delays the recovery if the business is buying on credit -not suitable for cash sales or zero rated businesses as would simply suffer a delay on input tax recovery
32
Conditions to join the cash accounting scheme? (4)
-in a vat group, applies to group figures -if vat-exclusive taxable turnover is expected to be <1,350,000 -can remain in the scheme until >1,600,000 -vat returns must be up to date and no convictions of VAT offences or penalties for dishonest conduct
33
Describe the operation of the cash accounting scheme (1)
-VAT is accounted for on the basis of cash receipts and payments rather than the basis of invoices issued/received
34
Record keeping (4) and how long
-copies if VAT invoices issued -evidence all input claims (invoices) -records of all inputs and outputs -VAT account 6 years
35
How to treat discounts for VAT purposes (2)
-charge full value and issue credit note if paid promptly -show both discounted and non-discounted values and state can only recover VAT for value paid. Adjust supplier record to correct output tax.
36
How to treat goods for own use for VAT purposes (2)
-good originally purchased for business purposes and then withdrawn for personal use = output vat must be accounted for on the replacement cost of the goods -good originally purchased for private use = no input VAT should be reclaimed and there it no output VAT charge
37
How to treat gifts for VAT purposes (2)
-gifts of inventory/NCAs treated as taxable at replacement value except (same person <50 in 12 months & trade samples) -gifts of service are not taxable supplies
38
Irrecoverable VAT (5)
-purchase of cars (unless 100% business purposes e.g. driving school or bought for immediate resale) -leased cars with some private use = 50% recoverable -non-business use (if partial private use, apportion) -business entertaining -purchases for which no VAT receipt is held
39
2 exceptions for which input VAT on business expenses if recoverable
-staff entertaining -entertaining overseas customers
40
Motor expenses VAT (3)
-recover all input VAT on running costs (fuel, repairs) even when there is some private use -if business pays for employee and there if private use, output charge will be payable. If driver reimburses business for cost of fuel for private use and if driver does not reimburse use fuel scale charge) -fuel scale charge is based on CO2 rating of the car (will be given in question if needed)
41
Relief for impairment losses (2) & timescales to claim
tax point rules = date of despatch or date of invoice -debt is at least 6 months old -debt has been written off in sellers books Claim within 4 years and 6 months of payment falling due
42
Describe a VAT group (2)
-2 or more UK companies with the parents having >50% indirect control (multiply) -non-corp can join (sole trader or partnership) if controller of group of companies with trade in the UK
43
Advantages of VAT group (2)
-No VAT on intra group supplies -Only one VAT return = admin cost savings
44
Dis-advantages of VAT group (4)
-jointly and severally liable -collection and collation of information for single VAT return may be tricky (diff sources) -limits for cash accounting scheme applied to whole group -annual accounting scheme and flat rate schemes for small businesses not available
45
Choices re VAT groups (2)
-not all companies need to be included -choose e.g. zero rated exclude as cash flow advantage when submitting monthly & include if making exempt supplies to allow recovery of input tax BUT makes the whole group partially exempt which could restrict input recovery
46
Who does the capital goods scheme apply to?
-partially exempt businesses -that spend large sums on certain qualifying NCAs
47
What is the capital goods scheme for?
anti-avoidance legislation designed to stop businesses manipulating their proportion of taxable and exempt supplies in period of purchase to recover more input VAT
48
What are qualifying NCAs for capital goods scheme?
(figures are net of VAT) -land and buildings <250k -single computer items costing >50k
49
Where does the capital goods scheme apply?
-initial recovery of input VAT = calculated in the usual way -reviewed of a set ADJUSTMENT PERIOD
50

Advanced Tax (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions